Court Decision is a Good Lesson on how National Aviation Policy will be Difficult to Achieve in its Implementation

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ARTICLE: Federal Appeals Court Upholds ALPA’s Challenge to EX–IM Bank

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The issue of a national aviation policy has been discussed here more than once and the dialogue frequently dissolves from broad philosophical positions to the specific application.

Boeing, GE Engines, P&W and others believe that the Export Import Bank follows a national aviation policy by encouraging US exports with loan guarantees. As evidenced by the above link and a prior post here, ALPA, Delta and Hawaiian disagree. They cite language in the Ex Im Bank’s statute requires that federal institution to protect US jobs, that’s their preferred national policy. The Ex Im bank’s statute lets each faction think that the national policy meets its goal.

The US Court of Appeals for the District of Columbia agreed with the petitioners, sort of. The judges held that the Ex Im Bank must assess the impact of the sale to a foreign airplane at this lesser financial cost. That test (12 U.S.C. § 635(b)(1)(B)) requires the bank to “take into account any serious adverse effect of such loan or guarantee on the competitive position of United States.”

That would seem to suggest that Congress has set the national aviation policy preferred by the union and two carriers, here. The quoted statute appears to require the bank to consider the impact of a loan guarantee on the US carrier. But careful examination of how §635(b) (1) (B) will likely be applied shows that the petitioners goal will not be achieved. The percentage points advantage will likely have little impact on the competitive posture of Air India, a company which has problems.  The loan guarantee can be reissued with a mere reassessment.

If, however, the loan guarantee was for a large number of aircraft to a well-run major European airline, the Ex Im bank’s financial calculations might find that a few percentage points could create a substantial advantage and thus would be blocked. But, even then the foreign carrier may participate in an alliance with a US carrier, contributing its bottom line. So this less-than-precise criteria might or might not attain the result preferred by the petitioners depending on the particular facts.

The point of all of these convoluted financial calculations is that the national aviation policy is a very vague standard (§635(b) (1) (B)) in its implementation.

The underlying problem with setting a national policy is that a single absolute rule is not likely to be regarded as good by the disparate perspectives of all of the stakeholders in aviation, when the general principle is written in precise terms. This example shows how the transition from grand principle to actual application creates more controversy.

A national aviation policy is, at best, an ephemeral goal. The differing views of the industry’s participants may agree on grand principles, but it is unlikely that the actual implementation of those macro concepts on a micro basis will not retain the consensus. Maybe the effort would be better suited to finding specific practices for which there may be some concurrence.

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